SAN FRANCISCO — Experts say a federal court ruling that may allow Vallejo, Calif., to escape its labor contracts could make bankruptcy a much more tempting option for municipalities and is likely to be upheld by higher courts.

U.S. Bankruptcy Court Judge Michael McManus said in a legal memorandum last week that Chapter 9 of the U.S. bankruptcy code allows municipalities to reject collective bargaining agreements. McManus stopped short of actually rejecting Vallejo’s contracts, telling the city and its unions to make a final attempt at negotiation before he decides the matter finally.

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